Since the bottom fell out on the world’s economy in 2008, investors have pored over Canada's monthly job gains and losses, searching for a glimmer of good news. But the business cycle is not the only factor that can influence labour markets. According to UBC economist Kevin Milligan, since the 1970s, public policy decisions and personal preferences have played a major role in everything from the number of working single moms to the average retirement age. Before today’s release of today’s jobs numbers, Milligan analyzed 35 years of employment data to see how these underlying factors have changed the face of our workforce.
He spoke with Huffington Post Canada business writer Rachel Mendleson.
HuffPost Canada: Is it a mistake to focus on the month-to-month labour reports?
Kevin Milligan: I think that one has to take it with caution especially when they get down to provincial level data and even city level data where the labour force survey doesn’t have a very big sample size so there can be a lot of variation in the data in smaller populations so there’s information in the month to month changes but you have to take it with a bit of caution.
HP: When you looked at the long-term labour data, what was the most significant trend you detected?
KM: There’s a couple of things that really jump out at you. One of them is huge growth in employment by parents of children, specifically single moms. If you look back at the mid-1990s, about half of single moms were receiving social assistance income. As of the most recent data available, that’s been cut by more than half.
HP: How do you explain that?
KM: You might think, “Well the economy has gotten better and rising tides lift all boats,” and it could be true. But, you know, we don’t see other groups -- be they single moms without kids or other groups -- having a big boom in their employment. So it’s really quite focused on the moms with kids.
One possible thing you might think is, “Gee, this is really focused on child care.” That’s an important factor for single moms with kids, but this boom we’re seeing is not just for [moms with] preschool kids, it’s for moms with older kids as well. And also, outside of Quebec, there’s not been any huge changes in childcare provision.
The bigger policy piece at play is the child benefit system. The National Child Benefit system was introduced in 1998, and that’s just about when you see this big jump in employment by single mothers. The system pays benefits that essentially you only get if you’re in the workplace, because in many provinces, [the benefit amount is] subtracted from your social assistance check, so you essentially only get the benefit of these things if you’re in the workplace. This provides a big incentive for people to join the workplace.
HP: What else did you notice?
KM: The No. 2 thing is on the other end of the distribution, which is people close to retirement, ages 60 to 64. There was a very long run trend of earlier and earlier retirements, so you saw these people were working less and less.
In 1995, that trend turned around, and we now see an increase of around 30 per cent in those between people -- men -- aged 60 o 64 who are working.
HP: What’s the explanation for that shift?
KM: There’s a couple of hypotheses that are out there. One is that this is a generation of men who are more and more likely to have a wife who is in the workplace. If you look at 1985 and people age 60, very few of them had wives with careers. As you hit 2005, it was more and more common for these women to be in the workplace. What you see is there’s a pretty strong preference for joint retirement. So these men are like, “I’m 64, my wife’s 60, I’m going to put in a couple more years until she’s ready to retire.” And actually, that can lead into older retirement ages for men.
HP: That’s really interesting, especially considering everything we heard during the downturn about people having to work longer because of their decimated stock portfolios.
KM: Yeah, you see those stories and I just don’t know the factual basis for them.
There are some that think this might be a function of what’s happening in the stock market, but it turns out that that has very little explanatory power for retirement ages, except for people right at the very top of the wealth distribution. In terms of population-wide retirement rates, the bottom half of the population relies almost entirely on public pensions, so they don’t care about what happens in the stock market. And of those in the top half, only very few actually have their retirement depend on stock market performance.
HP: There’s been a lot of discussion about the generation war between young and old workers, who both believe they’re worst off. Do the long-term trends speak to this?
KM: One of the greatest social changes over the last 40 years has been that those who were most likely to have low income -- be in poverty -- [used to be] the elderly, and young people were much less likely [to be in poverty]. That has entirely reversed itself, where now, those who are most likely to be in trouble are people in their 20s, whereas those who are retired, very few of them are below the low-income threshold.
HP: What do you think is behind the reversal?
KM: Public pensions were expanded in the 1970s and 1980s. But for young people, getting started in the labour market is much harder than it was in earlier times.
I certainly found it interesting in the federal election campaign that all three major parties were competing over how to expand pension benefits for the elderly. That’s fine, everyone can always use a bit more money, but that’s really not where the greatest trouble is in terms of where the local income is in our society.
HP: If public policy has such significant implications for the labour market, why do you think politicians don’t put more of an emphasis on addressing long-term trends when making policy decisions?
KM: Politicians are interested in getting reelected and they know quite well who their target voters are, and they fashion policies to attract those target voters. That’s what their job is. My job is to analyze whats really going on. Sometimes there’s some difference between the two.Suggest a correction